5 Tips for Handling a Financial Setback
A setback such as an unexpected medical bill or a job loss can be financially challenging and emotionally draining. Here are five ways to bolster your bank account, boost your confidence and make the most of a difficult situation.
1. Prioritize expenses.
Review your monthly expenses, then decide what you need to pay for immediately and what you can let go of temporarily. Housing, food, transportation and insurance should be some of your top priorities. For the time being, you may need to sacrifice takeout meals, new clothing or the latest video games. Calculate the amount of money you need each month, and be sure to live within your means.
2. Separate wants from needs.
Whenever you’re shopping, ask yourself if you really need the item you’re considering. If the answer is yes, can you wait a bit before purchasing it, buy it on sale or get it for less somewhere else?
Keep in mind that not every item has to be brand new. You can purchase gently used items through online garage sales, craigslist.org and similar resources. Search Facebook for local swap groups that trade clothing, household goods and more-or start this type of group if you can’t find one that meets your needs. You can even find neighbors interested in lending or borrowing power tools; your neighborhood newsletter and online platforms like Nextdoor can help you do this. And don’t forget your local library’s free-to-use books and movies, many of which can be accessed online.
3. Consider a credit consultation.
A credit consultation can help you create a plan for tackling debt and other financial issues. UW Credit Union members have free, confidential access to credit counselors and online tools from GreenPath Financial Wellness, a nonprofit organization designed to assist people who are facing financial difficulties.
With help from these resources, you may discover strategies for avoiding bankruptcy and ways to lower your loans’ interest rates, monthly payments or both.
4. If necessary, contact your creditors.
Paying your bills on time, including your credit card’s minimum monthly payment, is the most important factor in your credit score. Contact your creditors immediately if you think you can’t meet your payment deadlines.
5. Plan for the future.
When your situation starts to improve, start rebuilding your emergency fund. Ideally, you should set aside enough money for three to six months of expenses.
Once you’ve tallied your monthly expenses, have that sum deducted from your paycheck and deposited into a savings account. Also resist the urge to spend your entire income once you’re back on your feet. Few items are as valuable as the peace of mind your emergency fund can provide.
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